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Rise in a relative price or inflation?
When there is scarcity (insufficient supply) of commodities, transport, semiconductors, or a rise in energy prices due to the energy transition, at equilibrium there is a rise in the relative price (of commodities, transport, semiconductors, energy). But a rise in a relative price is not inflation, it is an adjustment of a relative price to the shortfall in the supply of the corresponding good or service. For the rise in a relative price to turn into inflation, it must trigger a lasting upward trend in prices, which requires strong indexation of nominal wages to prices. If nominal wage indexation to prices is weak, there is just a “bump” in inflation when the relative price adjusts. If it is strong, inflation can rise permanently. For the time being, wage indexation to prices in OECD countries remains weak.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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